Global steam coal price forecast (November 2015)

Metal Expert Consulting continues publishing open quarterly reports to share its understanding of the steam coal market development in a medium- and long term and compare it with the consensus forecast of investment companies and analysts.

Just like in the coking coal segment, over the recent months spot prices for steam coal have been moving down. In early November, the 6,000 kcal/kg material quotes dropped to $52/t FOB Newcastle.

With the actual price for steam coal being $58/t in Q3, the Metal Expert Consulting forecast issued in August turned out to be quite exact at $60/t, its inaccuracy being 3%. Meanwhile, forecasts of most investment banks differed from the actual price by $5/t or 9%.

Comparison of steam coal price forecast accuracy of Metal Expert Consulting and industry analysts over the recent year

Q1 15

Q2 15

Q3 15

Q4 15

Actual price

67

59

58

-

Consensus forecast (investment banks) – October 14

74

74

75

77

Metal Expert Consulting – October 14

69

71

73

73

Consensus forecast (investment banks) – January 15

67

68

68

70

Metal Expert Consulting – January 15

63

61

64

65

Consensus forecast (investment banks) – April 15

-

60

60

61

Metal Expert Consulting – April 15

-

57

65

61

Consensus forecast (investment banks) – August 15

-

-

63

63

Metal Expert Consulting – August 15

-

-

60

61

The consensus forecast being the average of the forecasts of analysts from 12 companies says the steam coal price will stabilize at $60-60/t by the end of 2016. The most optimistic opinion is shared by Morgan Stanley and Citigroup Inc. (up to $64-68/t in the next couple of months). The analysts of Credit Suisse and Liberum Capital are the most pessimistic, expecting the steam coal price to decline further to $52-55/t and stabilize at low levels until 2020.

Note: To get the forecasts, all available prices have been adjusted to a common benchmark basis – the FOB Australia price for 6,000 kcal/kg steam coal.

Metal Expert Consulting’s methodology of forecasting global steam coal prices is based on mixed forecasting methods and includes models of non-linear dynamics, demand and supply balance in the global coal market, and estimate of key suppliers’ costs. For more details on Metal Expert Consulting’s forecasting methods, see the November reports Global Iron Ore Price Forecast and Global Coking Coal Price Forecast.

According to Metal Expert Consulting’s estimates, in Q4 2015 – Q1 2016, the global steam coal price will drop to its lowest of $52/t. In 2017, the price is expected to increase to $62/t. In the long-term outlook, the steam coal price is likely to move up to $75-80/t.

The graph below shows comparison of Metal Expert Consulting’s most recent export price forecast for Australian steam coal with the prices that investment and industry analysts expect (adjusted to the same basis). In the short-term outlook, our forecast is similar to the minimum forecast of investment banks and industry experts, why our medium- and long-term forecasts are about the same as the consensus forecast.